On target with build to rent?

In 2012, the £200m build to rent scheme was launched as part of a government initiative to speed up construction and encourage developers to build innovative, high quality homes for the private rented sector. We take a look at where we are at in 2015, those affected by the scheme, and how you can apply for funding.

In 2013 the fund was increased to £1bn with a target of 8,000 – 10,000 new homes to be underway by 2015 and support local economic growth. However recent figures from the Department for Communities & Local Government (DCLG) show that only 4,000 homes are currently being delivered.

As one of the fastest growing housing sectors in the UK, the question remains as to why the market has fallen short of expectations as there is undoubtedly a real appetite for rental investment, and uses a housing model common place overseas. Not forgetting that 1 in 5 people are expecting to rent in the future as first time buyers are increasingly being priced out of the market.

How does build to rent work?

The scheme provides funding for developers building properties specifically for rent, available as a loan to cover up to half of the development costs. Developers can pay the loan back by selling on to an institutional investor or re-financing.

The fund will support high quality schemes which can start on site by March 2016. Schemes can be made up of single or multiple sites, but they must demonstrate good design and quality and will be attractive to institutional investors. The minimum size for a proposition in continuous market engagement is 100 new private rented units.

Purpose-built properties for rent are designed to include on-site amenities and communal areas – meaning higher living standards and fit for purpose homes to live in.

Landlords are corporate businesses – meaning less risk for the tenant being let go due to the individual landlord being forced to sell the property for personal reasons, and in effect being offered long term tenancies.

On the other hand, tenants could see increases in rent, unlike small landlords who tend not to increase rents for existing tenants over a period of time.

Individual buy to let investors

An influx of properties being purpose built for rent coming onto the market could mean reduced rental income for individual investors.

How can this be avoided? Having tenants in place before these properties are released on to the market and checking to see whether the property is located near build to rent sites.